The TSX is about to say goodbye to a formidable monthly dividend stock. First National Financial (TSX:FN) is being acquired by private equity funds managed by Birch Hill Equity Partners and Brookfield Asset Management, as announced on July 27. Canadian investors who hold FN stock as a lifetime source of monthly passive income in their Tax-Free Savings Accounts (TFSAs) should be looking around for replacements by the fourth quarter of this year. The Morguard North American Residential Real Estate Investment Trust (TSX:MRG.UN) could be a potential option to transform a $7,000 TFSA contribution into a lifetime of monthly passive income.
First National Financial stock had been a winning trade for long-term-oriented investors, generating more than 2,160% in total returns (including a 380% capital gain) since going public in 2006. Its dividends, paid monthly from income generated from a growing mortgage portfolio, were a reliable source of regular passive income. The non-bank mortgage underwriter’s current dividend yields 5.2% annually. FN stock kept raising its dividends every year, and had done so for 13 consecutive years. It has been one of the very few non-REIT monthly income stocks in Canada, but it’s getting acquired by the highest bidders this year.
If you intended to stash your $7,000 contribution for 2025 in FN stock, you have to look elsewhere. It’s time for individual investors to move on. But what could FN stock investors buy to replace the monthly dividend income stream? Morguard North American Residential REIT could be one among several monthly-dividend-paying options.
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Morguard North American Residential REIT
The Morguard North American Residential REIT is a residential property owner present in the North American housing market, providing accommodation on a monthly rental basis to a needy and growing urban population. The REIT acquires high-quality multi-suite residential properties in Canada and the United States, and has built a portfolio of 43 properties comprised of 13,089 residential suites and 239,500 square feet of commercial area located in Alberta, Ontario, Colorado, Texas, Louisiana, Illinois, Georgia, Florida, North Carolina, Virginia, and Maryland valued at about $4.3 billion as at June 30, 2025.
On July 29, the residential REIT reported a 4.1% year-over-year increase in second-quarter net operating income. This was driven by a 5.3% rise in Canadian rental rates and supported by higher occupancy rates in the U.S. portfolio. Average monthly rent on Canadian residential suites increased from $1,730 to $1,821 per month over the past 12 months; however, occupancy levels in Canada have declined from 98% to 95.2% by the end of June. U.S. occupancy has increased by 150 basis points from 93.3% in June 2024 to 94.8% going into the third quarter of this year.
From its geographically diversified rental portfolio, Morguard North American Residential REIT pays a monthly distribution that currently yields 4.2% annually. While this yield appears 100 basis points lower than First National Financial stock’s 5.2% (to which we have to emotionally and painfully wave goodbye), the REIT’s payout is likely here to stay.
A reliable monthly income play in a TFSA
The Morguard monthly distribution appears well covered in 2025. The REIT reported a 14.6% year-over-year increase in funds from operations (FFO) per unit for the second quarter, and an 11% jump during the first six months of this year. The FFO payout rate has significantly improved from 44.6% a year ago to 40.3%, making the monthly distribution safer in 2025.
Most noteworthy, the residential REIT enjoys low financial leverage. Its debt level, at a 39.5% debt-to-gross book value (Debt/GBV) ratio, is among the lowest in the Canadian real estate industry.
Remember, REIT distributions are generally taxable as ordinary income, unless stashed in a TFSA for tax protection.
Investor takeaway
Morguard North American Residential REIT could be a reliable source of passive income in a TFSA. However, you should not allocate your entire $7,000 contribution for 2025 to a single investment — diversification is necessary to limit and contain stock-specific risks. The acquisition of First National Financial stock by private equity funds is another lesson in diversification: It’s not just the risk of poor asset performance that TFSA investors should manage; your most prized income investments may still get snatched away by bigger players in the market because of their financial beauty.
